Youth Month: How to draw up a budget and get smart with your money
|Published
A basic budget is a tool that can help people gain control of their finances. Picture: Karen Sandison/African News Agency(ANA)
A basic budget is a tool that can help people gain control of their finances by managing their expenditure, saving money, and avoiding debt.
It can also help you prioritise your spending, says Sanah Gumede, head of Wealth and Investment at Standard Bank.
Here are 5 tips to help young people get a head start on their budgets:
1. Figure out your net income
The first step to creating a budget is knowing how much money is coming in. Make sure that your budget includes your net income as well as any extra money you are earning or receiving, such as allowances from your parents or cash that you are making from a side hustle.
2. Create a list of your expenses
Your expenses can be divided into three lists, namely fixed costs, discretionary costs, and savings.
These lists should include:
- Fixed costs: rent/bond, car payment, school fees, insurance, levies and bank fees
- Discretionary costs: entertainment, clothing, toiletries, transport, data and fuel.
- Savings: money that you are putting aside towards a savings goal.
3. Save for the unexpected
While drawing up your budget make sure that you create space for unexpected costs. Putting aside some money for a rainy day is a better option than going into debt when an emergency comes along and you need extra cash.
4. Prioritise
This is an important step that will allow you to make informed decisions in your budget plan. Know what you need or want spend your money on this month, and save towards other things to purchase next month.
5. Set goals
Having budget goals will allow you to be committed as it gives you something to work towards. Your goals could be saving for a holiday or spoiling yourself with an expensive set of headphones for your birthday. Write down your goals and keep revisiting them.
IOL Business